Target Corporation Final

Topics: Wal-Mart, Target Corporation, Household income in the United States Pages: 5 (1510 words) Published: February 28, 2015


Target Corporation
Case

Finance 3504
Dr. Casper

By:
Hyeji Jane Lee
Wajiha Yassin
Shawn Salvia

Executive Summary

In 1962, the first Target store was opened by its parent company, The Dayton Company, officially becoming the ‘Target Corporation’ during year 2000. In the following five years, Target’s sales saw a major increase raising their revenue to $52.6 billion. With 1400 locations throughout the nation, Doug Scovanner, the CEO, has to decide the next steps Target must take for continual growth. He was presented ten different investment options, which, he narrowed down to five with a total capital expenditure equaling $200 million. Upon analyzing the five locations, Scovanner has decided to suggest three locations, The Barn, Gopher Place, and Remodeling of the Stadium to the Capital Expenditure Committee (CEC). The Barn promised the highest NPV compared to its low investment cost, and holds the highest NPV even at the worst-case scenario. The Gopher place also offered a high NPV with a low investment cost with the second highest NPV at worst-case scenario. The Stadium Remodel yielded the highest NPV to Investment ratio while having the highest median income market with the highest percentage of college graduates. These three combined show the greatest return for the investments. In comparison, the other two locations, Whalen Court and Goldie’s Square, had a high initial investment cost with risky returns. Scovanner further explained how these three options would greatly diversify Target’s portfolio and lower its risk while maximizing its growth in this Target Corporation Analysis.

Introduction

Target is a strong preforming company with about 1,400 stores across the country. It carries merchandising assortments ranging from food and commodities to electronics, toys and sporting goods. Target is a strong preforming company with about 1,400 stores across the country. Target carries merchandising assortments ranging from food and commodities, to electronics, toys and sporting goods. Target’s business in comparison to its competitors focuses on the community and work environment, which allows them to tailor their product offerings, pricing, and branding to specific customer segments. The following explains the comparison between Target and its two major competitors, Wal-Mart and Costco, to help better explain why Target must expand to the three locations.

Business Model Comparison

Target’s business model differs from its competitors, Wal-Mart and Costco, in several ways. Both Wal-Mart and Target do not offer memberships for its members, unlike Costco, which offers memberships. This allows Costco’s customers to purchase goods at a discount. However, the main differentiating factor Target is the core consumers it adversities towards. Target aims to attract college-educated females with children who are more affluent then the typical Wal-Mart customers. Target emphasizes a store décor that gives off the right shopping ambiances, unlike Wal-Mart and Costco’s, which are equivalent to warehouses with goods stocked up. In addition, the taglines for Wal-Mart and Target get two different messages across: “Everyday, low prices” and “Expect more. Payless.” These two taglines reinforce their core customer base: more upscale for Target and the average shopper for Wal-Mart. The capital budgeting process at the Target Corporation is a very rigorous and strenuous process to get through. The Capital Expenditure Committee (CEC) brings together a team of top executives that met monthly to review all capital project requests, in order to approve or reject the projects. Each project typically takes between 12 to 24 months of development before it is presented to the CEC. Each project is assigned a real-estate manager within a specific geographic location who is responsible for the proposal from start to finish. In addition, the real-estate manager is in charge of reviewing and presenting the...
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